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Supreme Court accepts six new cases

Madison, Wisconsin -
April 21, 2011

The Wisconsin Supreme Court has voted to accept six new cases. The Court also acted to deny review in a number of cases. The case numbers, issues, and counties of origin are listed below. Court of Appeals opinions available online for the newly accepted cases are hyperlinked.

2009AP2385 Olson v. Farrar
This case examines the proper scope of review for a court to determine an insurance company’s duties to defend and indemnify under a personal liability policy that generally excludes coverage for “property damage” resulting from a “motorized vehicle.”

Some background: Todd Olson alleges that without his permission, Robert Farrar used Farrar’s farm tractor to pull Olson’s mobile trailer home about eight miles. The tractor was not powerful enough to pull the trailer home up a hill. The trailer rolled back, colliding with Olson’s truck, which was following the trailer home.

Olson sought compensation from Farrar for property damage to both the mobile trailer home and his truck. Upon receiving notice of this claim, Farrar’s insurer, Mt. Morris Mutual Insurance Co., provided Farrar a defense, reserved its rights pending a court determination on its duties to defend and indemnify. Mt. Morris also moved to intervene, bifurcate issues of coverage from liability and to stay proceedings on the merits until the trial court made a determination on coverage.

The policy provided Farrar with personal liability coverage for “property damage but specifically excluded from coverage property damage which results from the ownership, operation, maintenance, use .. of ‘motorized vehicles’ owned or operated by ... an insured.” An exception to the exclusion provided that Mt. Morris would pay for damages in the event that coverage was provided by an incidental motorized vehicle or watercraft coverage.

After the trial court granted Mt. Morris‘ motions, Mt. Morris moved for summary judgment, requesting the trial court find that it owed no duty to defend Farrar nor did it owe a duty of indemnity for the alleged damages. The trial court granted summary judgment, concluding there was no coverage under the policy because any property damage resulted from Farrar’s tractor, not the mobile home. Farrar appealed, and the Court of Appeals reversed and remanded.

The Court of Appeals noted that summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Prior to reaching the question of whether coverage for the accident existed under the policy, the Court of Appeals clarified the scope of its review. It disagreed with both Farrar and Mt. Morris that review was limited to the allegations set forth within the four corners of the complaint and the provisions of the policy.

The court went on to say that when an insurer has not refused to provide a defense prior to a determination of coverage and the question is not whether the insurer has an initial duty to defend but rather whether coverage is provided under the policy in question, then the court’s review is not limited by the four corners rule.

The Court of Appeals said prior to a determination of coverage, an insurer may be required to furnish a free defense to its insured, and the refusal to do so may be a breach of the duty to defend. It said, however, after a court determines that coverage does not exist under a policy, the insurer is no longer under an obligation to provide a defense and may dispute the issue of coverage without breaching its initial duty to defend by, among other things, seeking a bifurcated trial in which the circuit court decides the issue of coverage in an action separate from the action on the merits of the complaint. Baumann v. Elliott, 286 Wis. 2d 667, ¶8. (Ct. Appl. 2005). The Court of Appeals said in this case, Mt. Morris sought bifurcation and then sought summary judgment on the coverage issue. Therefore, it said it was beyond the initial duty to defend stage of the proceedings and was not constrained by the four corners rule.

The Court of Appeals said in order for there to be coverage in this case, the damage must have resulted from a mobile home trailer; the trailer must not have been towed by or attached to a motor vehicle; and the property damaged must not have been occupied by, used by, or in the care of Farrar.

Farrar argued that the policy provided coverage because the property damage to the mobile home and truck resulted from a mobile home trailer. Mt. Morris argued neither the damage to the mobile home nor the truck resulted from the mobile home trailer but rather the damage resulted from Farrar’s tractor.

Resolving the ambiguity in favor of coverage, the Court of Appeals concluded that the damage in this case “resulted from” the mobile home trailer. From Monroe County.

2010AP177 May v. May
This certification asks the Supreme Court to review whether a divorcing parties’ agreement to an unmodifiable child support floor for 33 months violates public policy. A decision could resolve a possible conflict in previous Court of Appeals and Supreme Court decisions.

Some background: Michael and Suzanne May were divorced in 2005 in Illinois after nine years of marriage. They share legal custody and physical placement of their two children. At the time of the divorce, Michael had recently lost his job. Pursuant to the divorce judgment and marital settlement agreement, Michael was to pay child support of $481.48 monthly, with child support to be recalculated when he became reemployed.

After both parties and their children moved to Wisconsin, both parties filed various post-judgment motions. On Jan. 7, 2008, the Dane County circuit court entered a stipulated order providing that Michael would pay child support of $1,203 per month. The parties stipulated that this “shall be the minimum amount due for a period of no less than 33 (thirty-three) months . . . and Michael may not file for a reduction in that amount for the full 33-month period.” Seventeen months later, in June of 2009, Michael moved for a reduction in the payment amount due to an alleged involuntary loss of his employment. Suzanne opposed the motion. The circuit court held that the 33-month floor in the stipulation was not against public policy and was otherwise enforceable. Michael appealed.

In its certification memorandum, District IV Court of Appeals says this case is not about “ceiling” stipulations, which the Supreme Court has held are unenforceable. See Frisch v. Henrichs, 2007 WI 102, ¶74 n.23, 304 Wis. 2d 1, 736 N.W.2d 85.

The Court of Appeals says the question of whether parties may stipulate to a floor below which the amount of support may not go has not squarely been presented to the Supreme Court. District IV notes that in a footnote in Frisch, this court said, “Stipulating to a minimum amount for a limited period of time does not violate public policy because it ensures that a certain amount of child support is received, which is in the best interests of the children.” Frisch, ¶74 n.23.

District IV notes that the Court of Appeals has published a number of opinions which considered stipulations that set a floor on the amount of support. Only one of those decisions was issued after Frisch.

In Jalovec v. Jalovec, 2007 WI App 206, 305 Wis. 2d 467, 739 N.W.2d 834, the Court of Appeals held that a stipulation setting a four-year floor on child support was against public policy. District IV says Jalovec appears to be inconsistent with this court’s footnote in Frisch, which made the blanket statement that a child support floor of limited duration is not against public policy.

A decision by the Supreme Court is expected to develop and clarify the law on the enforceability of child support stipulations that set a child support payment amount and then restrict the payor’s right to request downward adjustments. From Dane County.

2010AP387-CR State v. Nielsen
In this case, the Supreme Court reviews a challenge to a Court of Appeals order summarily imposing a $150 sanction against an assistant state public defender (SPD) for allegedly filing a false certification regarding an appendix to an appellate brief and omitting essential record documents from the appendix.

The SPD asks the Supreme Court to decide if the sanctions violate due process and if they impermissibly circumvent or supplant Supreme Court Rules established for deciding ethics issues through the Office of Lawyer Regulation. In addition, the SPD asks if rule Wis. Stat. Rule 809.19(2) Appendix, is unconstitutionally vague on its face or as applied for purposes of imposing monetary sanctions?

Some background: The SPD was appointed to provide post-conviction representation in State v. Gregory K. Nielsen, a case involving homicide by intoxicated use of a motor vehicle from Racine County.

The SPD attorney filed a post-conviction motion alleging that the circuit court erred when it failed to explain the rationale for the sentence it imposed, when it failed to explain why it rejected the sentence recommended in the presentence report, and by imposing a sentence that was excessive.

SPD counsel filed an appeal from the judgment of conviction and from the order denying post-conviction relief. The Court of Appeals summarily affirmed the judgment of conviction. The appeal raised a single issue: that the circuit court failed to fulfill the mandate articulated in State v. Gallion, 2004 WI 42, 270 Wis. 2d 535, 678 N.W.2d 197, to explain the rationale for the particular sentence imposed. In the appendix to the brief, the SPD attorney provided, among other things, photocopies of the three transcript pages in which the trial court announced the factors it was considering in pronouncing sentence.

The portion of the order that resulted in the petition for review noted that “the appellant’s appendix includes only a select portion of the sentencing court’s pronouncement and excludes that portion where the court discussed these aspects of Nielsen’s character…”

The appellant’s brief certified the appendix contains the “portions of the record essential to an understanding of the issues raised. The Court of Appeals imposed the sanction, concluding that omission of the entirety of [the] sentencing court’s remarks and that the certification was false. The court said the false certification and omission of essential record documents in the appendix places an unwarranted burden on the court and is grounds for imposition of a penalty. State v. Bons, 2007 WI App 124, ¶25, 301 Wis. 2d 227, 731 N.W.2d 376; see also Rule 809.83(2).

The SPD says the Court of Appeals has been imposing summary sanctions in this manner with increasing frequency. It says a Lexis search shows at least 23 cases where appendix and false certification sanctions have been imposed in a similar manner since the Court of Appeals declared it could do so in Bons. It says at least 17 such cases occurred in the last calendar year and this number under-reports the actual total because legal research tools such as Lexis do not include cases like this one that were resolved by summary order.

The SPD argues that the Court of Appeals’ practice of imposing monetary sanctions summarily in written decisions, for what the court deems to be violations of court rules regarding appendices in appellants’ briefs, violates due process because the sanctions are ordered without notice or an opportunity to be heard.

The SPD argues that declaring a certification “false” when the court’s subjective view of what is essential in regard to the subjective appendix content rule does not match the attorney’s subjective view, is a false equivalency and is based on an erroneous reading of the certification rule.

The Court of Appeals says although the petition for review challenges the appendix content rule, it effectively seeks review of the appellate rule addressing non-compliance with procedural rules, Rule 809.83(2). It says any modification of the process required to impose costs presumably should affect not only those cases where the Court of Appeals finds an appendix rule violation, but also cases where either the Supreme Court or the Court of Appeals finds any procedural rule violation. The Court of Appeals says both the appendix rule and the costs rule substantially affect the work of the Court of Appeals because it is primarily an error-correcting court and processes more than 3,000 appeals each year.

The Court of Appeals says given this material shortcoming in the appendix, it was reasonable to conclude that counsel violated Rule 809.19(2)(a) and sanctioned counsel and imposed a modest fine. The Court of Appeals says the imposition of costs is directly in line with other instances of appendix rule non-compliance, including Bons, and it says this conformity demonstrates that a reasonable judge could and in fact has imposed similar costs. From Racine County.

2009AP3029 Crown Castle v. Orion
This case examines whether circuit courts and court commissioners have authority to expand the scope of a supplemental examination to require a third-party company, sharing common ownership with a judgment debtor, to submit to a supplemental examination under Wis. Stat. § 816.03.

Some background: Crown Castle obtained a default judgment in Pennsylvania against Orion Construction, a Wisconsin company whose sole member is Douglas Larson. Crown Castle then filed this action in Wisconsin to execute the foreign judgment.

Orion Construction is the sole judgment debtor. The default judgment was based on Crown Castle’s claim that Orion Construction performed defective structural reinforcement work to cellular towers in Chicago.

Following entry of default judgment against Orion Construction, the circuit court commissioner ordered Orion Construction to provide Crown Castle with all records pertaining to Orion Construction’s assets and financial affairs.

A letter from Orion Construction’s attorney advised that there were no separate tax returns for Orion Construction, because it was a single member LLC, and provided Larson’s personal tax returns from 2005-07, and an accounting spreadsheet indicating a $210,831.00 account receivable from Crown Castle.

Crown Castle believed that Larson was concealing Orion Construction’s assets, and sought to examine the books and records of Orion Logistics. The circuit court commissioner expanded the order to include Orion Logistics.

Orion Logistics appealed the order. It argued that the circuit court erroneously exercised its discretion to order Orion Logistics to submit to a supplemental examination. The Court of Appeals noted it would affirm the circuit court if it considered the relevant facts, the proper legal standard, and used a demonstrated rational process to arrive at a reasonable conclusion.

The Court of Appeals said that Larson’s tax returns indicate that he had complete ownership and control over both Orion Construction and Orion Logistics. It concluded that the rationale of Courtyard Condo. Ass’n, Inc. v. Draper, 2001 WI App 115, ¶13, 244 Wis. 2d 153, 629 N.W.2d 38, would permit the court commissioner and circuit court to order a third-party company under common ownership with a judgment debtor to produce its books and disclose its finances.

The Court of Appeals said that Larson’s tax returns indicate that Orion Construction generated only $187,680.00 in gross receipts in 2007 after generating millions in sales in 2005 and 2006. Conversely, Orion Logistics’ only return indicated it generated over $15 million in gross receipts in 2007. The Court of Appeals said based on this evidence, the circuit court properly concluded that the proposed discovery may lead to relevant evidence in the collection of the judgment against Orion Construction.

Orion argues that no where in Wis. Stat. § 816.03 does the circuit court or court commissioner have the authority or discretion to subject it as a non-party to the underlying lawsuit, to supplementary proceedings. It argues the plain language of the statutes is limited to a “judgment debtor” concerning the “judgment debtor’s property.”

Crown Castle asserts that over a century ago, the court has made it clear the circuit court has broad discretion in determining the scope of a supplemental examination. Crown Castle says that for the last decade, Wisconsin courts have had no problem interpreting and applying § 816.03 to answer the question in the negative, without having to overrule Courtyard Condo.

Crown Castle contends the policy reasons behind the circuit court’s discretion could not be more clear: “Unless a comprehensive and searching examination be allowed, an artful debtor might defeat the discovery sought.” From Outagamie County.

2010AP355 Heritage Farms v. Markel Ins. Co.
These consolidated cases return to the Supreme Court after remand and examine whether plaintiffs in a civil suit whose property was damaged or destroyed by a forest fire are entitled to double damages from the defendants under Wis. Stat. § 26.21(1).

Some background: Jeffrey Knaack initially started the fire on the property of the Lake of the Woods Campground. Eventually, the fire escaped the campground’s property and spread over the property of many other property owners, ultimately consuming over 570 acres in Marquette and Waushara counties.

As a result, a number of corporations, trusts and individuals (collectively known as Heritage Farms) sued J.J.J. Recreation Corp, the operator of Lake of the Woods Campground and Knaack in cases that eventually were consolidated. The complaints alleged negligence, trespass and nuisance and sought double compensatory damages and their actual attorney fees and costs under Wis. Stat. § 26.21(1).

In Heritage Farms v. Markel Ins., 2009 WI 27, 316 Wis. 2d 47, 762 N.W.2d 652, the Supreme Court concluded Wis. Stat. § 26.21(1) is not limited to a specific class of tortfeasors such a railroad corporation, and the term “negligence” in § 26.21(1) does not require a showing of “gross” negligence. On remand to the circuit court, Heritage Farms moved for an award under § 26.21(1) of double the compensatory damages, and reasonable costs for legal representation with 12-percent interest on the double damage award and on the costs of legal representation from October 13, 2006 (the date of the verdict). The circuit court granted Heritage Farms’ request for actual attorney fees and costs, but denied the request for double damages and 12-percent interest. The Court of Appeals affirmed.

Heritage Farms argues case law construing similar statutes, which provide that a plaintiff “may recover” double damages, confirms that once the statute is violated, the double damage provisions are triggered by operation of law. Heritage Farms argues that under the statutory language there should be at least a presumption double damages are awarded once there is a finding the forest fire occurred through willfulness, malice or negligence.

The respondents argue the legislature intended to build discretion into the determination whether to award double damages under § 26.21(1) by examining the conduct giving rise to the fire. They also argue the statute is unconstitutional as applied to them. They assert § 26.21(1) fails to provide “any guidance or criteria for determining when, how or whether its punishing provisions are to be imposed or enforced under the facts and circumstances of this case.” They say § 26.21(1) requires the trier of fact to create and apply its “own standards for enforcement of the punishing provisions rather than those set out in the statute.” From Portage County.

2010AP1113-CR State v. Goss
In this case, the Supreme Court examines whether a driver with four prior OWI convictions, which carries a prohibited alcohol concentration of 0.02 percent, may be subject to a preliminary breath screening test based on a lower level of evidence supporting probable cause.

Some background: An Eau Claire police officer pulled over Jason E. Goss’ vehicle due to a traffic violation relating to an obscured rear license plate. During the stop, the officer learned that Goss had been convicted of OWI on four previous occasions and was driving with a revoked license.

The officer placed Goss under arrest and secured him in the squad car when the officer detected an odor of intoxicants. In response to the officer’s questioning, Goss admitted he had consumed two beers. The officer administered a preliminary breath test (PBT), which showed a blood alcohol concentration of .084 percent.

Because Goss had four prior OWI convictions, his permissible alcohol concentration level was less than 0.02 percent. Goss argued the facts within the officer’s knowledge were insufficient to provide grounds to administer the PBT under § 343.303.

He asserted that in County of Jefferson v. Renz, 231 Wis. 2d 293, 603 N.W.2d 541 (1999), the Legislature intended “probable cause to believe” that a noncommercial driver has violated Wis. Stat. § 346.63(1) or (2) to mean more proof than “any presence” of an intoxicant, but less than probable cause for arrest.

Goss argued if the person stopped is a commercial driver, the officer may request a PBT upon the detection of “any presence” of an intoxicant if the officer has “reason to believe” the driver has been operating the vehicle while intoxicated

Goss claimed that under Renz, merely smelling alcohol on his breath provided insufficient grounds for the officers to administer a PBT. The court disagreed with Goss and denied his motion to suppress the results of the PBT and other evidence. The Court of Appeals affirmed, concluding the officer knew that Goss had four prior OWI convictions, which meant that his permissible alcohol concentration was below .02 percent and Goss had admitted drinking two beers which could bring him over a lower limit. The Court of Appeals concluded the officer had sufficient information to have reason to believe that Goss was in violation of the OWI laws.

Goss moved for reconsideration, pointing out that his statement to the arresting officer, that he had two beers, was not considered by the trial court at the suppression hearing, because the state had agreed not to rely upon. The state declined to litigate whether the statement had been made in violation of Goss’ Miranda rights. See Miranda v. Arizona, 384 U.S. 436 (1966).

The Court of Appeals rejected Goss’ reconsideration motion. It concluded that the circuit court was entitled to determine the odor of intoxicants, in conjunction with the knowledge that Goss had four prior OWI convictions, provided probable cause to believe that Goss was in violation of the OWI laws.

Goss argues that more is required than merely the detection of the odor of intoxicants to find probable cause to believe that as a noncommercial driver with four priors, Goss had violated the OWI laws. He argues the officer lacked probable cause to request him to submit to the PBT merely on the basis that he had been convicted of four OWI offenses and his prohibited alcohol concentration was set at .02 percent. From Eau Claire County.

Review denied: The Supreme Court denied review in the following cases. As the state’s law-developing court, the Supreme Court exercises its discretion to select for review only those cases that fit certain statutory criteria (see Wis. Stat. § 809.62). Except where indicated, these cases came to the Court via petition for review by the party who lost in the lower court: